Important Terms to Know About Mergers and Acquisitions
Mergers and acquisitions, known as M&A for short, is part of the corporate strategy, finance and management world. This aspect of business involves buying, selling dividing and combining companies to grow an enterprise very quickly in its existing sector or totally new sector without using a joint venture. Familiarize yourself with the following important terms about mergers and acquisitions:
Takeover: In the corporate world, this refers to an instance where one company buys another. The company being bought is known as the target and the company doing the buying is known as the bidder. There are many types of takeovers: friendly, hostile, backflip or reverse.
Buyout: A transaction in investments where the ownership equity of a company is acquired. This can also refer to an instance where a majority of the company’s stock is acquired. Types of buyouts include venture capital buyout, management buyout and leveraged buyout.
Valuation: The estimation of something’s worth. In finance, these items can refer to financial assets or liabilities. You can provide a valuation on anything from stocks and options to patents and trademarks. Valuations are required for investment analysis, capital budgeting, financial reporting, and merger and acquisition transactions.
Liquidation: When a company is dissolved and the assets are redistributed. Also known as dissolution, liquidation can compulsory or voluntary, which is sometimes known as a shareholder’s liquidation.
Consolidation: When two companies come together to form a whole new company. Categorized as either a private or public acquisition, consolidation can occur as part of a hostile or friendly takeover.
Mergers and acquisitions for businesses can have strict rules that are outlined in a few acts, including the Sherman Act. If your business changes ownership, working with experts or an attorney can be a good way to ensure everything is running properly. A valuation approach can be given to help a corporation make a strategic move. While shareholders may not always benefit, they can have a lot of say in what a business does regarding money. Accretive and conglomerate mergers, dilutive deals, and joint ventures will all change assets that a company owns. If you're business wants to find out more information regarding due diligence, control risks, or what makes a merger go from friendly to a hostile takeover in mergers and acquisition, talking with a finance expert can be extremely important. Different transactions, such as the liquidation of assets from one entity, using hybrid bonds, or buying and selling companies will need to follow certain requirements in order to be legal. Changing management can also be a difficult procedure that shareholders may not agree upon. You can find valuation handbooks available to help you through the process of buying and selling a whole company. Corporation mergers and acquisitions needs to be carefully thought out and you may benefit greatly from having an attorney explain to you what needs to be done in order for the government to approve the transaction. Research the different types of transactions your company can do in order to find what the best move is. Whether its changing management or selling a company you will want to make sure it is the right thing to do.